Fed can’t leave rates this low for much longer

Despite the clear improvement in the incoming economic data over the past month, which has triggered a reversal of the earlier tightening in financial conditions, the chance of the Fed raising interest rates at next week’s FOMC meeting, which concludes on Wednesday 16th March, is close to zero. Nevertheless, with the market turmoil subsiding and domestic price pressures mounting, we expect the Fed to resume raising rates in June (or possibly even April), with the fed funds target range climbing to between 1.00% and 1.25% by year-end.